The end of Binance could be the end of crypto
The noose around crypto seems to be tightening. Fresh off the fraud conviction of FTX founder Sam Bankman-Fried, US attorneys plan to extract a multi-billion-dollar payment from crypto exchange Binance in return for discontinuing their criminal investigation of it. This follows reports that Binance’s CEO, Changpeng Zhao, has stepped down and will plead guilty to violating criminal US anti-money-laundering requirements
Although crypto prices have bounced off the depths they plumbed in last year’s crash, they remain well off the highs of their peak two years ago. Even this strength is a bit of an illusion, though. The crypto market’s tenacity is sustained by a relatively small number of traders, who are sticking to their HODL mantra (Hold on for Dear Life). When there aren’t many sellers, it only takes a few bids to drive prices back up. However, signs of fresh demand are growing increasingly scarce. Meanwhile the struggles of crypto exchanges such as Binance and Coinbase are making the sector’s future look increasingly questionable
As I have previously written, the creation of Bitcoin, the original cryptocurrency, was arguably an act of guerrilla warfare against the Western financial system. When, amid the 2008 financial crisis, asset markets crashed and the banks which had caused the turmoil looked set to collapse, many ordinary folk felt justice was being done. But the central banks rushed to the rescue by flooding the markets with cheap money, thereby boosting asset values. Banker bonuses were soon flowing again.
The public was furious, and Bitcoin’s creators channeled the rage, using a devious hack to exploit monetary policy and expose it as little more than currency debasement. By creating an asset with a fixed supply, its inventors ensured its continued inflation, since the rising supply of money would drive its price ever upwards. And sure enough, from its humble origins at a value of a few dollars, Bitcoin would eventually surge to trade for more than $60,000
